Posted on 12/16/2003 5:06:01 PM PST by PAR35
DALLAS -- Halliburton Co. (HAL, news) took a giant step toward completing its $4 billion asbestos litigation settlement Tuesday by filing for bankruptcy protection for its DII industries unit, which includes its Kellogg Brown & Root construction and engineering services business.
The long-awaited filing is part of an agreement that would create a bankruptcy trust to handle all current and future lawsuits filed against Halliburton and its subsidiaries alleging that workers were harmed from inhaling deadly asbestos fibers.
The trust fund, which will process and pay all valid claims, will be funded by Halliburton with a mixture of cash and stock.
With the filing in the Pittsburgh court of bankruptcy Judge Judith K. Fitzgerald, Halliburton joins a long line of other industrial companies that have sought bankruptcy protection to escape a fast-growing wave of asbestos lawsuits. For Halliburton, the lawsuits had swelled to more than 400,000 claims in recent months, and showed no signs of slowing.
Most of the details of the bankruptcy, filed under Chapter 11 of the code, have already been sorted out and approved by the majority of asbestos plaintiffs, said Halliburton in an arrangement known as a "prepackaged" bankruptcy. That should allow Halliburton to move through the bankruptcy process more quickly.
"In the absence of substantial objectors, there's no reason they couldn't wrap this up in six months," said Joe Rice, a plaintiffs' attorney representing asbestos claimants against Halliburton.
The filing doesn't include Halliburton's government contracting business, known as KBR Services Inc., which was carved out of the agreement because it doesn't have any asbestos liability, the company said.
It is that unit that is in charge of Halliburton's work in Iraq under a controversial no-bid contract to repair and rebuild Iraq's oilfields and import and distribute fuel to the war-torn nation.
Last week, the U.S. Department of Defense disclosed that its auditors had raised two major questions about KBR's costs and billing practices, including $ 61 million in possible overcharges stemming from fuel bought from Kuwait.
Halliburton has denied any impropriety, and the matter is still under review.
Halliburton described the bankruptcy filing as "a major milestone" in its effort to settle its asbestos liability, and said it will have no effect on the company's current operations.
"The reorganization plan provides permanent and final resolution of Halliburton's asbestos issues," said spokeswoman Wendy Hall.
The plan must still be approved by Judge Fitzgerald.
Halliburton emphasized that all businesses involved in the bankruptcy filing will continue to operate normally. While many asbestos-burdened companies have relinquished at least some ownership and control over their businesses when creating and funding a bankruptcy-related asbestos trust, Halliburton has arranged to fund the trust separately, thus retaining control and ownership over its subsidiaries.
The settlement plan was originally announced a year ago, with hopes of a speedy resolution by summer. But the plan has been subject to repeated setbacks as Halliburton delayed the bankruptcy filing. It blamed a growing pile of lawsuits and more work than it expected in confirming the validity of all the claims it will have to pay under the settlement.
At the same time, Halliburton was backing efforts in Congress to pass legislation that would provide a universal resolution for companies besieged with asbestos litigation -- and perhaps provide a cheaper way out for Halliburton. When that effort appeared to fizzle this fall, Halliburton moved swiftly to conclude its $4 billion settlement.
"I think Halliburton realized that the certainty of having a consensual agreement was far superior to the unknown, convoluted alternative of federal legislation," said Mr. Rice, the plaintiff's attorney who helped hash out the agreement with Halliburton.
As part of the settlement, Halliburton agreed to pay $326 million of the cash portion of the settlement prior to the Chapter 11 filing.
With the bankruptcy proceedings now in motion, Halliburton said it would increase its reserves for asbestos and silica claims to reflect the full amount of the settlement. The increase will result in a pretax charge of about $1 billion in the fourth quarter, the company said.
Copyright 2003 Dow Jones & Company, Inc. All Rights Reserved.
Scams, Scalawags, and an all-too-gullible Public...famous frauds sold to America
Granted that the liability is porbably grossly inflated, but who should bear the liability of a company that has been purchased? Are you saying that the previous stockholders should be the ones to pay? It seems like when you buy an enterprise you are buying its assets and liabilities.
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